Featured investors: Kathryn Harbour, Realtor with Keller Williams and Steve & Denise Nunley, Steeden Preferred Properties
Deal Notes & Numbers:
1935 historic home in Acworth, Georgia. Within walking distance of Lake Acworth, multiple public parks, and the historic downtown Acworth area, home to local dining, boutique retail, an arts district, and other local businesses and services.
1,300 square feet
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Are you thinking of investing in real estate? However you don’t have enough money to do so. In this article is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best gamble is to locate a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be glad to help you out! There are several variations that may be used depending on you and your vendor. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Rather than having the money sit in a bank they could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or you could sell. Unless you struck an actual bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank may still be scared there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is mostly around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the property if you default, they don’t care what sort of money you make. Complete the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the whole picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.